Ford Fusion Output Boost Tests $2,300 Premium Over Camry

An undated handout photograph shows Toyota Motor Corp.'s 2012 Toyota Camry XLE vehicles. Camry’s average prices have fallen 2 percent to $23,965, and the car has slipped from ranking eighth in the segment at this point last year. Source: Toyota Motor Corp. via Bloomberg

Aug. 26 (Bloomberg) -- Ford Motor Co. has bigger
aspirations than challenging Toyota Motor Corp.’s Camry. Its
Fusion is about to take on the law of supply and demand.

An assembly plant about 20 miles south of Ford headquarters
in Dearborn, Michigan, is preparing to roll Fusion family cars
off the line for the first time. The additional supply will test
the staying power of a more than $2,300 per-sale premium that
Fusion has commanded this year over America’s longtime best-selling car, the Camry.

“Ford has managed to be a volume player competitive with
the Toyota Camry and the Honda Accord while still maintaining a
far more competitive price point,” Alec Gutierrez, an analyst
with Kelley Blue Book, said by telephone. “You might see prices
come down a few hundred dollars, but I don’t think they face any
significant risk of serious price degradation. They’re going to
hold their premium spot in the segment.”

The Fusion is Ford’s best shot at eventually reclaiming the
car-sales crown it last held in the 1990s heyday of the Taurus,
a model Chief Executive Officer Alan Mulally studied at Boeing
Co. The Fusion’s sale surge -- 13 percent so far this year --
has cut a quarter of Camry’s sales lead, demonstrated how much
consumers care about attractive design and shown how
aggressively U.S. carmakers can now compete in all segments.

It has also overwhelmed capacity at the only plant where it
has been made, in Hermosillo, Mexico, which couldn’t make more
than about 350,000 Fusions and Lincoln MKZ sedans. The Mustang
assembly plant in Flat Rock, Michigan, hired 1,400 employees to
produce as many as 100,000 more Fusions.

Climbing Capacity

The added output draws Ford closer to production levels
that Toyota and Honda Motor Co. reach with their Camry and
Accord. It also positions the No. 2 U.S. automaker to continue
growing in coastal states that were long a source of weakness.

Ford fell 0.2 percent $16.41 at the close in New York. The
shares have gained 27 percent this year as the Standard & Poor’s
500 Index advanced 16 percent.

The average price that the Fusion has sold for this year
through July climbed 5.8 percent to $26,343, behind only
Volkswagen AG’s Passat in the mid-size car segment, according to
Kelley Blue Book.

Fusions are selling at a premium of $1,176 above the
segment average and $2,378 over Toyota City, Japan-based
Toyota’s Camry, which ranked No. 11 in segment pricing this
year, behind entries such as Chrysler Group LLC’s 200 sedan,
said the researcher, which includes some incentives in its
analysis.

Camry Prices

Camry’s average prices have fallen 2 percent to $23,965,
and the car has slipped from ranking eighth in the segment at
this point last year.

“The Fusion is probably the most interesting mid-size car
because it’s being sold on a variety of fronts,” Alan Baum, an
independent auto analyst in West Bloomfield, Michigan, said by
telephone. “No. 1, it’s gorgeous, and the fact that design
matters in the mid-size segment has not always been a given.”

Another selling point has been Fusion’s fuel economy, said
Baum, whose research on electric and plug-in vehicles was used
by the Obama administration to help set U.S. green car sales
goals. Ford is offering Fusions powered by a standard gasoline
engine, three turbocharged EcoBoosts, hybrid and plug-in hybrid
powertrains -- everything but all-electric, Baum said.

The range of options has enabled Ford to generate interest
by marketing the 47 miles (76 kilometers) per gallon highway
fuel economy rating for Fusion hybrid, even though the bulk of
sales are gasoline-engine models rated 34 or 37 mpg highway.

California Gains

Improved fuel economy for the redesigned Fusion sedan and
Escape small utility as well as efficient new models such as the
C-Max hybrid are fueling Ford’s growth in California, a state
that has given American carmakers fits for years.

The Ford brand’s 18 percent jump in California light-vehicle sales during the year’s first half put the marque within
0.1 percentage point of the Honda brand’s market share,
according to the California New Car Dealers Association.

“It was not because of pickup trucks that Ford became more
competitive in California,” Baum said. “C-Max is essentially
all additive, and the Fusion hybrid has done quite well.”

Ford is training new workers at its assembly plant in Flat
Rock to help boost inventory in markets such as Los Angeles, San
Francisco and Miami. While Ford had about 40 days supply of
Fusion across the country at the beginning of this month, the
carmaker carried enough stock to last 30 days in those markets,
said Erich Merkle, its U.S. sales analyst.

Detroit’s Cars

“Ford spent a lot of money on the vehicle, it’s gotten
really good reviews, it looks really nice, and you want to be
able to make as many as you can now,” said Adam Jonas, an auto
analyst for Morgan Stanley.

Even with its looks, prices will probably come down some as
Ford accelerates Fusion production, because the earliest models
were loaded with content and the extra output may be of lower-priced versions, Jonas said in a telephone interview.

The automaker has said it’s on track to increase Fusion
production this quarter.

The Fusion is a standout among Detroit’s most competitive
set of passenger cars in a generation. The car’s redesign has
drawn comparisons to Aston Martin styling. General Motors Co.’s
Chevrolet Impala last month received the highest rating from
Consumer Reports among all sedans, a first in at least 20 years
for a U.S. carmaker to have outscored all Japanese and European
competitors in that segment.

Sales Fight

“We have an automobile market unlike any other in the last
40 years, where everybody is equal in that they all have
terrific cars,” said Maryann Keller, principal at auto-industry
consulting firm Maryann Keller & Associates in Stamford,
Connecticut. “Now, everybody is fighting for every sale.”

The Fusion has prompted Toyota to acknowledge the challenge
it faces to maintain leadership for its Camry sedan, which has
reigned as the top-selling U.S. passenger car for 11 years and
15 of the last 16.

“It is true that rival carmakers have come out with very
competitive models in the segment, and that competition in the
U.S. mid-size sedan segment is becoming fiercer,” Nobuyori
Kodaira, a Toyota executive vice president, said last week in
Tokyo. “What we need to do is to come out with even more
competitive models.”

Production Boost

The additional production from Flat Rock could allow Ford
to stretch for as much as 450,000 units of combined annual
Fusion output from the Michigan factory and its Hermosillo plant
in Mexico, said Jeff Schuster, an analyst for LMC Automotive.
The researcher estimates that Toyota has capacity in North
America to build about 475,000 Camrys per year, while Honda can
assemble about 450,000 Accords.

LMC forecasts Ford making about 350,000 to 360,000 Fusions
this year, Schuster said.

“Ford is not saying this extra production is what we’re
going to do to enable us to be the most popular car in
America,” said Baum, the independent analyst. “That would be
foolish. This car is profitable and can remain profitable even
with more volume. The design of it has a longer shelf life than
most mid-size vehicles.”